Avago Technologies (NASDAQ:AVGO) has acquired fellow American Broadcom (NASDAQ:BRCM) for US$37 billion (33.9 billion), the largest ever transaction in the industry, and one that will make it the third largest semiconductor manufacturer behind Intel and Qualcomm.
The new group, to be based in Singapore, will have a market value of US$77 billion, said Avago and Broadcom.
Singapore registered Avago, which also has corporate offices in San Jose, California, has offered to pay Broadcom shareholders US$17 billion in cash plus additional shares totaling approximately $20 billion. Avago said it would borrow up to nine billion dollars to complete the transaction.
Despite the merger’s official confirmation of the merger, shares of both merger protagonists were trading lower on Thursday with Broadcom dropping 2.5% and Avago following suit by 0.4%.
Broadcom, based in Irvine, California, manufactures semiconductors for products such as set-top boxes, mobile phones and network equipment. It is best known for connectivity chips that integrate Wi-Fi and Bluetooth technologies found in smartphones from Apple and Samsung Electronics.
Until today, Avago’s biggest purchase was LSI, in May 2014, for US$6.6 billion. In February, the group bought Emulex for US$606 million.
Analysts predict the takeover trend among chip makers will continue to be a hit in 2015, given that the market offers several such targets including Xilinx, MaxLinear, Intersil, Cavium and Atmel.
Intel is rumored to be preparing to buy Altera for an amount likely to exceed US$10 billion, according to Reuters.
Both groups hope to complete their merger in the first quarter 2016, providing the merger is approved.
Avago Technologies is expected to report US$1.83 earnings per share for the current quarter according to analysts later today and after close of markets.